Interim results

27th May 2009 07:00



27 May 2009

Electronic Data Processing PLC (EDP)

Interim results - 6 months to 31 March 2009

EDP is an IT solution provider to the UK wholesale distribution industry and a supplier of Sales Intelligence software solutions more widely.

Financial Highlights

Michael Heller, Chairman of EDP, said:

"We remain cautious about the outlook for the second half and do not expect activity levels to increase during that period. However, with our strong contracted recurring revenues and significantly reduced cost base, we are well positioned to withstand the current economic turbulence."

-Ends-

For further information please contact:

Julian Wassell	Toby Mountford
Chief Executive	Citigate Dewe Rogerson
0114 262 2007	020 7638 9571 Mob: 07710 356 611

www.edp.co.uk

Chairman's Statement

Group turnover for the 6 months to 31 March 2009 was £3.13 million (2008: £3.47 million). This represents a reduction of 10% compared with the corresponding period last year reflecting the slow-down in the economy as a whole.

Pre-tax profit for the period was £340,000 (2008: £566,000 excluding profit on disposal of property of £668,000). Adjusted operating profit, before non-cash IFRS charges, was £304,000 (2008: £505,000) representing an operating margin of 9.7% (2008: 14.5%).

The reduction in turnover during the period is due wholly to a decline in non-recurring revenues, which include initial charges for new software licences and professional services. Importantly, our contracted recurring revenues, relating principally to annual software licences and hosting fees, remained at the same overall level as the corresponding period last year and represented 74% of turnover. It is these recurring revenues which underpin our business model and cover the day to day cash operating costs of the business.

As reported in our interim management statement in February, the markets which the Group serves continue to experience significant difficulties due to the current harsh economic climate. Difficult trading conditions mean that customers and prospects are delaying their discretionary IT expenditure and, where we are involved in opportunities, the sales cycle remains significantly longer than normal. Naturally and in common with most other businesses, we face an increased risk of potential bad debts. However, since the start of the current financial year we have only seen one small customer go into administration with a loss of annual revenue of around £6,000. Cash collection and working capital management remain of paramount importance.

The actions that we have taken over the last two years to reduce the Group's cost base have stood us in good stead. We continue to actively manage the Group's costs and in April, after the period end, we have reduced our overall headcount from 93 to 78. This will result in annual cost savings in excess of £400,000. The cost of this was approximately £200,000 and will be reflected in the result for the second half. Accordingly the exercise will have a broadly neutral impact on the result for the second half of the financial year with the full effect of the annual savings being felt from 1 October 2009.

Research & Development expenditure during the period was £573,000 (£1.2 million in the full year to 30 September 2008) all of which has been charged in the Income Statement. We have focused our R&D efforts on the development of our graphical distribution application which will be available, on schedule, at the end of June 2009 and the browser-based version of our Vecta sales intelligence product which remains on schedule to be released around the end of the year.

The number of customers using the Group's hosting facility has increased once again. We now have 77 customers hosted compared with 64 at 31 March 2008 which represents 22% of total revenue (2008: 19%).

In January we announced a tender offer to buy back a significant proportion of the Company's share capital. This was successfully completed on 6 April 2009 with almost half of the Company's shares being repurchased at a price of 50p per share. The offer was approximately 10% oversubscribed. As a result, £6 million of cash was returned to shareholders after the period end. Costs associated with this amounted to approximately £190,000 and will be reflected as a charge directly against equity and reserves in the second half of the financial year.

Group net assets were £14.1 million at 31 March 2009 which included cash balances of £8.7 million. Shortly after the period end this was reduced by approximately £6.2 million as a result of the share buy-back and £490,000 in respect of the 2008 final dividend. However, the Group still has a strong debt-free balance sheet and cash balances at today's date in excess of £2 million.

Your Directors have resolved to pay an interim dividend of 0.713p per ordinary share, the same as last year. The interim dividend will be paid on 3 August 2009 to those shareholders on the register on 3 July 2009. The shares will be ex-dividend on 1 July 2009.

We remain cautious about the outlook for the second half and do not expect activity levels to increase during that period. However, with our strong contracted recurring revenues and significantly reduced cost base, we are well positioned to withstand the current economic turbulence.

Michael Heller 26 May 2009

Chairman

Principal Risks and Uncertainties

The Group operates in a changing economic and technological environment that presents risks, many of which are driven by factors that we cannot control or predict. The key risks and uncertainties facing the Group are as follows:

Wider economic factors

As with most other businesses in the UK the Group's operations can be adversely affected by a significant downturn in the economy. Such conditions can result in lower levels of discretionary IT expenditure together with an increased risk of bad debts. In particular, the current difficulties being faced by the construction industry have a knock-on effect to those of our customers operating in the builders and timber merchants sectors. We seek to mitigate these risks by ensuring that a significant proportion of the Group's revenues are derived from long-term contracts with our customers, by ensuring that our products appeal to businesses operating in a range of business sectors and by generally seeking payment for our recurring licence fees annually in advance.

Market conditions 

The Group operates in a competitive environment, particularly the market for our distribution applications. New entrants to our marketplace and actions taken by existing competitors could have an impact on our levels of business activity and product pricing in the market generally. We endeavour to provide excellent customer support together with high quality products at a competitive price in order to develop and protect strong customer relationships.

Key personnel

As a software and services provider, the Group is a people-based business. Loss of key individuals could have an impact on our ability to deliver products and services or to generate new business opportunities. Accordingly we are continually focused on the need to recruit, retain, reward and motivate staff with the appropriate skills. 

Technological changes

Technology in the software industry can change rapidly. It is important that our products remain up to date and that our development plans are flexible. We make a significant ongoing investment in Research and Development to allow us to identify and adapt to any technological changes that do occur thereby ensuring that our products continue to meet the demands of our customers.

Financial risks

The Group's revenues and costs are almost exclusively denominated in sterling and therefore are not exposed to foreign exchange fluctuations. The Group has significant cash deposits which could be exposed to credit and interest rate risk. Whilst cash is only invested in recognised UK based banks, we do have some exposure to fluctuations in interest rates which are beyond our control. However, the situation is monitored constantly to ensure competitive rates are obtained.

Responsibility Statement of the Directors in respect of the half-yearly Financial Report 

We confirm that to the best of our knowledge:

 

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

• the half-yearly management report includes a fair review of the information required by: 

 

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

J H Wassell

Secretary

26 May 2009

The Directors who all served throughout the period are:

M.A. Heller  J. H. Wassell  P. A. Davey P. J. Davies  C. R. Spicer

Chairman  Chief Executive and Finance Director Sales Director Application Software Products Director Network Services Director

 

Condensed Consolidated Income Statement
For the 6 months ended 31 March 2009
	Unaudited		Unaudited		Audited
	6 months		6 months		Full year
	to		to		to
	31.3.09		31.3.08		30.9.08
	£'000		£'000		£'000
Revenue	3,125		3,466		6,850
Gross profit	2,877		3,213		6,299
Administrative expenses	(2,638)		(2,829)		(5,609)
Operating profit	239		384		690
Profit on disposal of property	-		668		1,157
Finance income	101		182		375
Profit before tax	340		1,234		2,222
Income tax expense	(98)		(192)		(390)
Profit for the period attributable
to equity holders of the parent	242		1,042		1,832
Earnings per share - basic and diluted	0.99p		4.25p		7.47p
Dividends per share	0.713p		5.713p		7.713p
Net assets per share	57.3p		60.2p		58.4p

 

Condensed Consolidated Statement of Recognised Income and Expense

for the 6 months ended 31 March 2009

			Unaudited		Unaudited		Audited
			6 months		6 months		Full year
			to		to		to
			31.3.09		31.3.08		30.9.08
			£'000		£'000		£'000
Net actuarial (losses)/gains on defined benefit pension scheme			(19)		409		643
Tax on items recognised directly in equity			5		(115)		(180)
Foreign exchange translation difference			6		1		-
Net (expense)/income recognised directly in equity			(8)		295		463
Profit for the period			242		1,042		1,832
Total recognised income and expense attributable
to equity holders of the parent			234		1,337		2,295

  

Condensed Consolidated Balance Sheet  at 31 March 2009
	Unaudited		Unaudited		Audited
	at		at		at
	31.3.09		31.3.08		30.9.08
	£'000		£'000		£'000
Non-current assets
Property, plant and equipment	6,407		6,457		6,491
Deferred tax asset	10		15		9
Employee benefits	1,434		1,221		1,429
Intangible assets	695		859		781
	8,546		8,552		8,710
Current assets
Assets held for sale	-		1,082		-
Inventories	114		135		134
Trade and other receivables	1,521		2,203		2,193
Cash and cash equivalents	8,718		8,016		8,734
	10,353		11,436		11,061
Total assets	18,899		19,988		19,771
Current liabilities
Deferred income	(2,273)		(2,403)		(2,740)
Income tax payable	(239)		(367)		(138)
Trade and other payables	(1,544)		(1,743)		(1,694)
	(4,056)		(4,513)		(4,572)
Non-current liabilities
Deferred income	(144)		(246)		(222)
Deferred tax liability	(638)		(469)		(660)
	(782)		(715)		(882)
Total liabilities	(4,838)		(5,228)		(5,454)
Net assets	14,061		14,760		14,317
Equity
Issued capital	1,226		1,226		1,226
Share premium	119		119		119
Capital redemption reserve	88		88		88
Translation reserve	3		(2)		(3)
Retained earnings	12,625		13,329		12,887
Total equity attributable to equity  holders of the parent	14,061		14,760		14,317

Condensed Consolidated Cash Flow Statement
for the 6 months ended 31 March 2009
	Unaudited		Unaudited		Audited
	6 months		6 months		Full year
	to		to		to
	31.3.09		31.3.08		30.9.08
	£'000		£'000		£'000
Cash flows from operating activities
Profit for the period	242		1,042		1,832
Adjustments for:
Depreciation and amortisation	202		207		424
Net loss/(profit) on disposal of property, plant and equipment	4		(673)		(1,166)
Pension (credit)/charge	(24)		11		37
Finance income	(101)		(182)		(375)
Income tax expense	98		192		390
Changes in working capital (see note 8)	(531)		65		832
Cash (used in)/received from operations	(110)		662		1,974
Interest received	139		176		367
Income taxes paid	(14)		-		(295)
Net cash from operating activities	15		838		2,046
Cash flows from investing activities
Purchase of property, plant and equipment	(43)		(132)		(315)
Purchase of intangible assets	-		(19)		(27)
Proceeds from sale of property, plant and equipment	7		1,365		2,958
Net cash (used in)/generated from investing activities	(36)		1,214		2,616
Cash flows from financing activities
Dividends paid	-		-		(1,891)
Net cash used in financing activities	-		-		(1,891)
Net (decrease)/increase in cash and cash equivalents	(21)		2,052		2,771
Cash and cash equivalents at beginning of period	8,734		5,963		5,963
Effect of exchange rate fluctuations on cash held	5		1		-
Cash and cash equivalents at end of period	8,718		8,016		8,734

Notes

1 Basis of Preparation 

The unaudited interim financial information for the six months ended 31 March 2009 has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.The accounting policies applied are consistent with those to be adopted in the Group's next annual accounts, which are the same as those policies used in the preparation of the accounts for the year ended 30 September 2008. During the period the EU endorsed IFRIC 14, The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, and adoption of the interpretation is mandatory for accounting periods beginning after 31 December 2008. This interpretation, which may impact on the carrying value of any pension surplus recognised in the balance sheet, has not been adopted in the interim financial information for the six months ended 31 March 2009.

2 Interim Financial Information 

The comparative figures for the financial year ended 30 September 2008 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

3 Significant Judgements, Assumptions and Risks 

In preparing these interim results the significant judgements and estimates made by management in applying the Group's accounting policies are the same as those that applied to the accounts for the year ended 30 September 2008. These estimates and associated assumptions are based on historical experience and other reasonable factors which form the basis of determining the reported values of assets and liabilities.

4 Segment Information 

The following table presents revenue and results by geographical segment.

		Unaudited		Unaudited		Audited
		6 months		6 months		Full year
		to		to		to
		31.3.09		31.3.08		30.9.08
		£'000		£'000		£'000
	Revenue - UK	3,089		3,415		6,764
	- USA	36		51		86
		3,125		3,466		6,850
	Operating profit/(loss) - UK	241		371		666
	- USA	(2)		13		24
		239		384		690

  

5	Adjusted Operating Profit
		Unaudited		Unaudited
		6 months		6 months
		to		to
		31.3.09		31.3.08
		£'000		£'000
	Operating profit	239		384
	Adjustments for non-cash items:
	Amortisation of intangible assets under IFRS	65		65
	Other	-		11
	Redundancy costs	-		45
	Adjusted operating profit	304		505

6	Reconciliation of movement in equity
		Unaudited		Unaudited
		6 months		6 months
		to		to
		31.3.09		31.3.08
		£'000		£'000
	Total equity at 1 October	14,317		13,913
	Total recognised income and expense	234		1,337
	Dividends approved	(490)		(490)
	Total equity At 31 March	14,061		14,760

7 Taxation

The taxation charge is derived from the Directors' best estimate of the annual tax rate applied to the result for the period.

8 Note on cash flows

"Changes in working capital" for the 6 months ended 31 March 2009 include the payment of a one-off VAT liability of £280,000 relating to the sale of a freehold property in a prior period. Adjusting for this item would give an increase in working capital for the 6 months of £251,000 as opposed to £531,000. Similarly "Cash used in operations" of £110,000 would become "cash received from operations" of £170,000.

9 Earnings per Share

Earnings per share is calculated by dividing the profit after tax of £242,000 (2008: £1,042,000) by 24,522,362 (2008: 24,522,362) being the average number of shares in issue during the period. Basic and diluted earnings per share are both 0.99p (2008: 4.25p).

10 Events after the balance sheet date

On 6 April 2009 the Company completed a tender offer to buy back 48.9% of its ordinary share capital at a price of 50p per share. As a result £6 million of cash was returned to shareholders after the period end.

ENDIR SELFMMSUSEII

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Related Shares:

Electronic Data Processing